Could blockchain be used to protect online gamblers?

The gambling industry is poised to take advantage of blockchain technology – and even the National Lottery has shown interest…

by Edmund West for CNR

The National Lottery is played by 70 per cent of British adults every year. Online gambling is booming. They are all vulnerable to hacking, lost tickets, people cheating and such like. Lotteries, tickets and prizes can be faked. Could blockchain be used to protect gamblers’ winnings? Quite possible. And already, online gambling platforms like Firelotto are employing blockchain to secure their transactions.

Blockchain is, of course, a censor-proof public ledger from which nothing can be deleted without approval by 51 per cent of users. This has the potential to make lotteries far safer. A blockchain is decentralised, not controlled by a central server. This prevents hackers or middlemen stealing your money. Also, blockchain gambling pays out your winnings instantly and can generate truly random numbers. Each transaction contains a digital signature, so cheating is harder.

Dr Kevin Curran, senior member of the Institute of Electrical and Electronics Engineers and Professor at the University of Ulster, explained how this works for the gambling industry. “A blockchain is a distributed database that maintains a growing list of records secured from tampering or revision. It is decentralised to overcome a single point of failure. No single organisation can claim ownership – if planned that way – but rather the group work together to confirm legitimate new transactions”, be explained. “It is composed of data structure blocks where each block holds batches of individual transactions and the results of any blockchain executables. All of these blocks contain a timestamp and a link to a previous block. The blockchain serves as a public ledger of transactions which cannot be reversed. The all-important consensus of transaction (e.g. legitimate votes) is achieved through ‘miners’ all agreeing to validate new records being added to a database”

Curran continued, adding that “person A adds the details of his bet or ticket purchases and uploads it to the blockchain of nodes, which then add the new transaction to the underlying blockchain. Should it be deemed a valid transaction – which often is validated mathematically – by the majority of nodes, then the new vote is added to the end of the blockchain and remains there forever”.

What is neat about this solution is the fact that no centralised authority is needed to approve the transaction but rather a majority consensus.

“Thus unless a person loses control of their all-important ‘private key’ – then that transaction whether it is to do with gambling or purchasing a ticket can always be verified as belonging to that person. Therefore to a certain degree, a blockchain can prevent cheating, tampering and false claims of ownership.”

Privacy

Of course, keeping your private key should be no harder than keeping passwords. Dzmitry Lapo, CTO of Platio, believes that blockchain could make gambling far safer for the players.

“Blockchain could become an easy and efficient way to increase trust in lotteries, remove fraud and protect gamblers. Taking the case of the National Lottery, blockchain technologies can be used to prepare a ‘smart contract’ between participants and the lottery organisers. All actions taken within the contract are fixed and can’t be changed (the blockchain prevents any change being made). Therefore, all human factors that could influence the result of lottery, such as accidental, human mistake or fraud, can be eliminated.”

Smart contracts could also be used for birth certificates, passports, driving licenses and such like.

The Isle of Man is not only a hub for the gambling industry, its government was the first to use a blockchain ledger to register company data. Brian Donegan, head of e-Business operations for the Isle of Man Government, told CNR that “a lottery winner may now have winnings protected by the censorship resistant record (which underpins identity, verification and trust) of the blockchain which has the potential to prevent criminals from accessing assets. This format works in the same way for traditional bank customers wishing to protect funds from fraudster access.”

One problem that plagues gambling is counterfeit tickets. A solution adopted by BitTicket is to have one wallet for storing all of a user’s tickets. Michael Smolenski, CEO and founder of Lightstreams, said that blockchain could prevent scalpers from committing fraud.

“The blockchain offering grants a lot of previously infeasible technical improvements to the existing ticketing industry”, he told us. “The ‘chain’ in question is made up of a series of cryptographically-linked records, with each containing the hash of the previous entry, making counterfeiting virtually impossible. Insofar as the secondary ticketing market, which is a huge industry in and of itself, it permits individuals to transact in a peer-to-peer manner with much less risk involved. On top of this, the use of a publicly viewable ledger would allow any stakeholders – whether promoters, events staff or holders – to see the journey the ticket has taken from its creation at source”.

“There are a few kinks to iron out, however: The success of the proposed platforms is contingent on their adoption, which may be difficult when it comes to taking on the existing oligopoly of ticketing businesses. That said, incumbent businesses have been particularly receptive to blockchain technologies as of late, so this task may be easier than one might initially think.”

Michael felt that the main barrier to widespread adoption of blockchain was the need for user privacy, though. “There are problems pertaining to scalability and confidentiality in interacting with public blockchains, which threaten their long-term viability for serious industrial use cases. I’m a strong proponent of the combination of off-chain storage with on-chain governance achieved by smart contracts to these ends. As well as keeping information secure and distributed alongside the main chain and further ensuring that said data can only be seen by parties permitted to see it, it would allow for a wide range of smart contract applications in buying/selling tickets on secondary markets. I feel an added layer of confidentiality is vital, especially if projects begin to incorporate personal IDs at some level.”

A spokesperson for Camelot, the company behind the National Lottery, told us that they had looked into blockchain but had no plans for adopting it at present.